Amazon makes a killing on electricity rates paid for by the rural poor
If you've ever wondered if crony capitalism is a thing, look no farther than Amazon's record on energy, something it needs to stay competitive as Dracula needs a blood supply.
The internet giant, according to this Bloomberg report, has an absolutely ravenous appetite for the much derided petroleum products, given that its internet model requires lots and lots of electricity.
This sort of thing is becoming a pattern. Amazon Web Services, the company's cloud computing business, is its fastest-growing and most profitable division, but it comes with a lot of upfront infrastructure costs and ongoing expenses, the biggest of which is electricity. Over the past two years, Amazon has almost doubled the size of its physical footprint worldwide, to 254 million square feet, including dozens of new data centers with vast fields of servers running 24/7. In at least two states, it's also negotiated with utilities and politicians to stick other people with the bills, piling untold millions of dollars on top of the estimated $1.2 billion in state and municipal tax incentives the company has received over the past decade.
As it goes around setting up "data centers" around the country – which employ about 50 people apiece, not a large number – it cuts deals with local officials for cheaper energy than the rest of the market pays. That deficit has to be paid for by someone, so the money not collected from Amazon gets stuck onto the bills of the regular rate-payers, who often are the rural poor, people who already struggle with high energy bills owing to their location and their work, which is often on farms.
Worse still, Amazon makes these deals non-transparent, so the public isn't even allowed to view them before they happen. Between Amazon and the pols, one hand washes the other.
Amazon does it this way to get pols in its pocket for bringing some sort of business to their location, as well as to add to the tax base, and who knows, the prestige of drawing an Amazon operation to the district. Amazon in turn drives a hard bargain because it knows that lots of places are competing for its business. The deal-cutting, under the table, just sticks it to the rural poor, who have to make up the lost revenue on the energy in their own higher energy bills.
Here is how ZeroHedge summed it up:
Bloomberg's bottom line: It's tough to know just how much of Amazon's electricity and infrastructure costs other people are bearing, but in Virginia, the tab starts at $172 million.
Interestingly, the story of Amazon sponging off others on electricity costs extends well beyond the Bloomberg investigative report. Amazon is also famous for investing in wind power and other kinds of alternative energy, presumably to virtue-signal.
Actually, there's something extra in it for them on that energy front, too. Wind power is subsidized by taxpayers in places such as California, where state officials are alternative energy fanatics who have "mandates" for alternative energy consumption by consumers. Build a wind plant, get a subsidy, as well as guaranteed high prices for the energy you sell to others. That's the situation there and why all of the Silicon Valley hipster companies are highly involved in wind power projects out in California's hinterlands.
Who pays for that? California's taxpayers, of course, which, again, includes many rural poor.
Seems Amazon's entire business model is premised on getting energy, the baseline for all its business operations, at a rate lower than what markets pay. It seems to be the pattern.
While one understands that a business has a job to cut its costs as low as they can go, one can argue that that extends only as far as fair free markets in level-playing-field competition go. Amazon seems to want to tip the playing field so it's not level, kind of like the way hackers get into the upper levels of code to gain their advantages. It's not fair to the others.
That may be all right if that is what the public wants, but the opacity of the whole thing suggests something more nefarious going on. The public has a right to know what's going on, but right now, the crony-capitalist nature of these exchanges prevents it. That's where the people we elect start to matter. Sunlight, and voters striking out at the pols for not bringing it, is the only way they can reassert their rights to fair pricing and fair markets.